On 1st April, the Charity Commission published fresh guidance encouraging trustees to review budgets, reserves, board understanding of financial information, and early warning signs of financial stress.
This message is particularly relevant in the current climate. Many organisations continue to face increasing demand for services, inflationary cost pressures, uncertainty over future funding and growing expectations from beneficiaries, funders and regulators alike. Against that backdrop, financial resilience depends not only on the figures themselves, but on how well trustees understand those figures and how willing they are to act on warning signs at an early stage.
For trustees, this means ensuring that finance is discussed in a meaningful way at board level. Financial information should be timely, clear and accessible, enabling trustees to identify trends rather than simply review historic results. Boards should understand the assumptions built into budgets and forecasts, the charity’s cash position, the adequacy of reserves, and the extent to which key activities remain financially sustainable. Where deficits are emerging, or where unrestricted funding is under pressure, trustees should be able to challenge constructively and consider what action may be needed.
This is also a useful time for organisations to revisit whether their financial framework remains fit for purpose. Reserves policies, delegated authorities, management reporting and scenario planning may all merit review, particularly where the operating environment has changed materially over the last year. Good financial habits are rarely about one major decision; more often, they are about consistent discipline, regular oversight and the willingness to ask difficult questions before problems escalate.
The Charity Commission also has a resource called the Trustee Finance Toolkit that can be helpful for Trustees when it comes to managing the organisations’ finances.
The wider lesson is that financial governance should not be reactive. An organisation with strong financial habits is better placed to respond to uncertainty, adapt its plans where necessary and make informed decisions that protect both services and long-term sustainability.
